Red flags fly in Hollywood

Recent acquisitions of Hollywood studios by Chinese media corporations — in particular Dalian Wanda’s purchasing spree in the US screen industry — have caused a US panic over ‘a Chinese Communist takeover of Hollywood’. In September 2016, 16 members of US Congress issued a letter that called for closer scrutiny of Chinese media investment, expressing ‘growing concerns’ of Chinese efforts to exert ‘propaganda controls on American media’.

Back in 2015, the US–China Economic and Security Review Commission also released a report which concluded that ‘with an eye toward distribution in China, American filmmakers increasingly edit films in anticipation of Chinese censors’ many potential sensitivities’.

Chinese companies’ high-profile investment in Hollywood studios and US cinemas is unprecedented in US–China film and business exchanges. The most remarkable cases include Alibaba’s latest partnership with Steven Spielberg’s Amblin Partners, Dalian Wanda Group’s latest purchase of Dick Clark Productions for US$1 billion, as well as its acquisitions of Legendary Entertainment for US$3.5 billion and Carmike Cinemas for US$1.1 billion, and Bona Film Group’s US$235 million investment in a slate of 20th Century Fox movies.

These moves have left many Americans with the impression that Chinese firms are going to conquer the US screen industry. Such a ‘Red Scare’ is not new: it is symbolic of a Cold War mentality. China and the United States are two countries with fundamental disparities in political ideologies and cultural values as well as an uneasy historical relationship. To some, China’s ascendance as a global power threatens both US values and its way of life. Compared with similar 1970s acquisitions of US companies by the Japanese — a key Asian ally — China’s expansion seems more frightening to the average American.

China does have its own agenda. This expansion into the US industry is part of its long-practiced strategy of ‘going to sea by borrowing a boat’ — taking advantage of Hollywood resources to transform its domestic film industry, export Chinese culture and enhance its soft power.

For example, Wanda’s acquisitions of Hollywood studios are often considered overpriced or financially risky, but these moves are just the first step for Wanda to take a strong foothold in the market. According to Husam Sam Asi, a UK Screen reporter, within 18 months of Wanda spending US$800 million to purchase the financially struggling AMC entertainment, it turned AMC into a profitable company valued at US$1.7 billion by extending the business into China and restructuring the company. Wanda’s purchase of Legendary Entertainment also helped it to produce its latest blockbuster co-production The Great Wall. Wanda’s partnership with Sony could empower it to beat Disney in its theme park business. With this transfer of knowledge and capital, the Chinese industry can learn, grow and further expand its influence.

So is the US’s Red Scare mentality justified? The answer is a firm no and there are several reasons why.

First, those caught up in Red Scare ideology are ignorant of the drastic changes that have taken place in Chinese society and the Chinese state over the past 30 years. China has become gradually integrated into the global market economy system and now follows the rules of the WTO. To a large degree, communism and socialism in China have become merely rhetoric and Beijing now utilises much of the ‘Washington Consensus’ in terms of its market economy. Chinese-style ‘socialism’ and Western-style capitalism are no longer mutually exclusive.

Second, those critics underestimate the checking power of the market economy, and how commodified the nature of the film industry is. China’s domestic film industry has been transformed into a profit-driven cultural industry rather than a propagandistic tool for the Chinese Communist Party (CCP). Film is a market product, and its value depends on its sales and the audience’s tastes. Even if the CCP intends to promote Chinese soft power via the film industry, obvious and clichéd propaganda does not work in China, let alone in the United States. Without market value, film can hardly create cultural values or exert further influence.

Third, Chinese companies’ aggressive expansion will have a head-on collision with the US’ mature market economy, established industrial structure and rule of law, which will constrain and limit excessively unethical business practices.

So what are the possible outcomes from the increasing sprawl of Chinese companies in the US screen industry?

First and least plausibly, Chinese companies could conduct massive acquisitions of US companies and studios, exercise a complete takeover of Hollywood and launch a mass wave of communist propaganda.

Second, Congress could check the spread of Chinese companies and shut the free trade door. This is possible but a highly unlikely scenario. US companies need money — with which China is rich — whereas China wants the advanced filmmaking technologies and story-telling techniques possessed by US companies. The latest loosening of the quota on film imports by China and the possibility of the increase in revenue-sharing imports by 2017–18 speaks to China’s growing need for Hollywood movies.

Third and most plausibly, the United States and China continue to collaborate. Collaboration between the two countries can be interdependent and mutually beneficial. It can not only transform both industries and create new business models, but also transform the Chinese state and the CPP. Ultimately it is the market economy that rules, and money talks.

Wendy Su is an Associate Professor at the Media and Cultural Studies Faculty, University of California, Riverside.